|
The best tip we can give on how to invest wisely boils down to two words: ask questions. Over the years, we've seen far too many investors who suffered avoidable losses because they didn't ask basic questions from the start. When it comes to planning your financial future, take nothing for granted — ask questions, demand answers, and make sure you understand the consequences of your choices before you commit your hard-earned money.
Although you may be eligible to participate in a 403(b) plan, don't assume that your employer has checked out or approved any particular investment product or any firm or professional that sells potential 403(b) investments. School districts typically do not engage in that sort of screening, and some states prevents school districts from limiting the companies that can sell 403(b) plan investments. That's why it's so important to do some homework on your own to assure yourself that the choices you make as the best for you in light of your personal circumstances and financial objectives.
For starters, be sure to ask at least the following three key questions:
- Will I have to pay any penalties if I change my investment choices? If so, how much?
Make sure you know the answer to this critically important question before you make your investment choices. The answer will depending on the type of product you initially chose and when you purchased that product in your account. For example, if you withdraw money from a variable annuity within a certain period after a purchase payment (typically within six to eight years, but sometimes as long as ten years), the insurance company usually will assess a "surrender" charge. A surrender charge is a type of sales charge that compensates the financial professional who sold the variable annuity to you. Generally, the surrender charge is a percentage of the amount you sell or exchange, and it will decline gradually over a period of several years, known as the "surrender period." For example, a 7% charge might apply in the first year after a purchase payment, 6% in the second year, 5% in the third year, and so on until the eighth year, when the surrender charge no longer applies. Some variable annuity contracts will allow you to withdraw part of your account value each year — 10% or 15% of your account value, for example — without paying a surrender charge.
|